PERTH (miningweekly.com) – Lithium miner Galaxy Resources has signed a binding share purchase agreement with China’s Sichuan Tianqi Lithium Industries to divest of its Jiangsu battery grade lithium carbonate plant in a deal worth $230-million.

Under the terms of the transaction, Galaxy would sell its entire share in Hong Kong subsidiary Galaxy Lithium International, which owns the Jiangsu plant, in exchange for $122-million in cash and Tianqi assuming the entire $108-million of Chinese bank debt owed by Galaxy.

Galaxy MD Anthony Tse said that the transaction was a major step in the financial transformation of Galaxy.

“Since becoming responsible for the management of the company, the new board and executive management team at Galaxy have been entirely focused on the best ways to reduce the interest-bearing debt of the company without further diluting shareholder equity.”

Galaxy has been on a fund-raising mission since 2013, with the company raising about A$37.3-million through an entitlement offer in September, and initiating negotiations with strategic investment institutions regarding equity positions in the company.

Tse said that selling the Jiangsu plant would leave the company in a strong net positive cash position, with an increase in shareholder’s equity, which would leave the company in a strong position to extract the maximum value for shareholders from the remaining portfolio of lithium assets, in particular the Sal de Vida project, in Argentina.

“The transaction with Tianqi provides Galaxy with the opportunity to significantly strengthen its financial position and transform its balance sheet. Following the divestment of the Jiangsu plant, the company will continue to retain significant exposure to the lithium sector, through the Sal de Vida project and the Mt Cattlin project, in Western Australia, as well as James Bay, in Quebec.”

Tse said that the company would continue to investigate how best to extract value from the Mt Cattlin and James Bay projects, while concentrating on the development of Sal de Vida.

The Sal de Vida project will require a capital investment of some $369.2-million, to support production of 25 000 t/y of battery-grade lithium carbonate and 95 000 t/y of potash, over 40 years.